San Francisco Fed President Mary Daly Supports Rate Cuts

(Reuters) – San Francisco Federal Reserve Bank President Mary Daly on Wednesday said she "fully" supported the U.S. central bank's half-of-a-percentage-point interest-rate cut last month and anticipated one or two more cuts this year if economic conditions unfold as expected.

> "The labor market has downshifted," Daly stated in an interview with KTVB anchor Carolyn Holly at Boise State University, expressing confidence that inflation is moving toward the Fed's 2% target.

With the Fed maintaining its policy rate in the 5.25%-5.50% range since July 2023, Daly noted that rising real interest rates could potentially harm the economy without improving inflation.

> "I do not want to see further slowing in the labor market," she remarked.

Daly characterized last month’s rate cut as a means to align policy with the economy, emphasizing that it does not provide clues for future actions or pace.

Fed projections suggest one or two quarter-point cuts may occur during the remaining meetings this year, a perspective Daly shares.

> "Two more cuts this year, or one more cut this year, really spans the range of what is likely in my mind, given my projection for the economy," she stated.

Different Fed policymakers have varied opinions on the September decision, from full support to reservations. Meeting minutes indicated unanimous concern that the rate adjustment not be seen as a signal of a worsening economic outlook.

Daly believes the labor market, with a 4.1% unemployment rate, is currently at full employment.